UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 15538 / October 21, 1997
SECURITIES AND EXCHANGE COMMISSION v. OFFSHORE FINANCIAL CORPORATION, et
al.
3:96-CV-2655, USDC, ND/TX (Dallas Division)
The Securities and Exchange Commission ("Commission") announced that
on October 20, 1997, in United States District Court, Dallas, Texas, Final
Judgments of Permanent Injunction and Other Equitable Relief were entered
against William R. Brosseau, Charles E. Rose, and Kenneth W. McKay,
individually and as the representative for relief defendants Ken McKay
Investment Company, Inc., and Prodigal International, Inc. Brosseau, Rose
and McKay, without admitting or denying the allegations in the Commission's
complaint, consented to be permanently enjoined from future violations of
Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section
10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.
The Commission's complaint alleged that Brosseau, Rose and McKay
fraudulently raised nearly $8 million through the sale of interests in oil
and gas programs sponsored by Offshore Financial Corp. According to the
complaint, the defendants told investors that the oil and gas prospects
presented minimal risks, that the wells would produce investment returns of
more than 40% per annum for periods as long as 25 years, and that their
entire investment would be returned in less than two years. Brosseau and
McKay were also alleged to have taken in excess of $1.1 million each of
investors' funds for their own use.
The Final Judgments also provide for the disgorgement of gains
received by the defendants as a result of their conduct alleged in the
complaint. Brosseau was ordered to pay $1,388,659.76, plus prejudgment
interest, and McKay was ordered to pay $1,180,663.74, plus prejudgment
interest, with the provision that each shall have credit for any sums paid
by them to the United States Trustee in the pending bankruptcy of Offshore
Financial Corp. The balance of Brosseau's and McKay's disgorgement amounts
is waived based on their demonstrated financial inability to pay. Rose was
ordered to pay $315,000, plus prejudgment interest; however, the full
amount was waived based on his demonstrated financial inability to pay. No
civil penalties were ordered by the court based on the poor financial
condition of each defendant.
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